Governance | 5 Key Agenda for Medium and Large Brazilian Companies in 2024

Brazilian companies that we have seen grow, innovate and generate value in different segments of Brazilian economy have in common strategic attention to medium and long-term funding, governance, talent attraction and M&A opportunities.

The factor below apply to companies in all major sectors in Brazil, including agribusiness, technology, manufacturing, finance, energy, and others. 

Companies that want to grow in 2024 should consider the following 5 themes in their strategic plans:

1. Focus on Attracting Structured Financing in Brazilian Reais: The Brazilian capital market for fixed income credit is closer than ever to medium and large companies, but still few are aware of the importance to create relationships with local financial institutions, funds, family offices and other medium and long-term capital financiers.

Even so, agribusiness companies issued more than BRL100 billion in Agribusiness Receivables Certificates (CRA) so far in 2023, acquired by funds, family offices and other investors, to raise medium to long-term resources (5 to 10 years).

Likewise, companies in the real estate sector issued Certificates of Real Estate Receivables (CRI) in high volumes to finance projects and costs of projects already built, with terms of 5 to 10 years.

Commercial Notes and Debentures are also medium and long-term funding options for companies.

2. Look at Obtaining Foreign Funding From Foreign Banks and Funds: Brazil’s participation is still irrelevant in international trade, with a share of close to 2% of global trade volume.

Even so, agricultural, industrial and technology companies export commodities, value-added products and services that generate receivables in dollars and other hard currencies that can be financed by foreign funding.

There are several foreign financial institutions, trading companies, funds, family offices and investors that finance exports of Brazilian companies, via export prepayment lines, direct loans, draft (international duplicate discount), among others, in a volume that exceeds US$50 billion annually.

Companies should seek these financing channels as another funding alternative, especially in hard currency.

3. Implement Corporate Governance: As a condition for accessing credit or investor capital, medium and large Brazilian companies need to implement a solid corporate governance structure.

Governance includes (i) audit of financial statements, (ii) management structure, with clear competencies, powers and jurisdictions, (iii) professionalization of the team, (iv) compliance, with the establishment of clear codes and policies of “good practices”, and (v) succession and relationship between controlling shareholders.

4. Create Talent Retention Program: Retaining talent is essential for growth, innovation and attracting investment for companies.

Therefore, (i) creating a talent retention plan with vesting and stock options, (ii) which employees will have the right to participate, and (iii) requirements to participate in the program are important aspects to consider.

5. Pay attention to M&A and Corporate Venture Opportunities: Acquiring or being the target of an acquisition is part of the trajectory of medium and large companies.

In the M&A part, it is important to implement structured corporate governance, with audited financial statements, to facilitate acquisition movements (because the seller will ask for proof that the buyer is able to pay the price) and sale movements (because the company will have its numbers organized and verified by an independent auditor). Everything to save time in markets that are increasingly competitive.

In terms of Corporate Venture, where companies seek to identify startups that have products or services that can add value to their business, it is worth thinking about creating a Corporate Venture structure through a separate investment company and making contributions via convertible mutual or even through through direct acquisition of capital (if the risk/opportunities allow).

The 5 themes above are strategic and can help medium and large companies in 2024 to grow and prosper.

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